What is a DPN? 

The Taxation Administration Act provides for certain circumstances where a director may be personally liable for tax debts of a company. This liability is known as a Director’s Penalty. In order to enforce a Director’s Penalty, the Australian Taxation Office must first issue a Director’s Penalty Notice (DPN). A DPN is an official notice issued by the Australian Taxation Office to current or former directors of a company, informing them they may/have become personally liable for unpaid company debts, relating to tax and superannuation. A DPN can be lockdown or non-lockdown, and they differ in the options available to directors upon receiving the notice.   

Is your DPN lockdown or non-lockdown? 

Non-lockdown DPNs 

A non-lockdown DPN may be issued to the director of a company if: 

  • the business activity statements (BAS), instalment activity statements (IAS); and/or 
  • superannuation guarantee charge (SGC) statements have been filed within three (3) months of the lodgement deadline; and 
  • the PAYG, GST or the SGC is still outstanding. 

What options does a director have for non-lockdown DPNs? 

A non-lockdown DPN provides Directors with a certain timeframe in order to remit or waive their personal liability for company tax debts. The options to remit the Director’s Penalty are often detailed in the DPN and include doing the following within 21 days: 

  • Causing the company to comply with its obligations by paying the amount owed;  
  • Appointing a Voluntary Administrator to the company; 
  • Placing the company into Liquidation; or 
  • Appointing a small business restructuring practitioner. 

If none of these actions occur within 21 days, the Director will become personally liable to pay the Director’s Penalties. If you have received a non-lockdown DPN, it is important to take immediate action. 

Lockdown DPNs 

If a company director does not submit the required BAS, IAS, or SGC statements within three months of the lodgement deadline, they can be issued a Director Penalty Notice with lockdown provisions. 

What options does a director have for a lockdown DPN? 

In this situation, the sole recourse for directors is to ensure the debt to be paid in full.  

What to do next? 

Timely action and expert advice are both crucial in effectively navigating a DPN. It’s best to consult with a registered liquidator or administrator, so they can negotiate with the ATO on behalf of the director. Click HERE to learn about Jones Partners’ experienced and talented insolvency practitioners.  

*This article is not intended as legal advice and Jones Partners accepts no liability any reliance on the above information. Individuals should seek professional advice to better understand their unique situation.